Overvalued Amazon, Nvidia, AMD May Be Facing More Declines Ahead

Overvalued Amazon, Nvidia, AMD May Be Facing More Declines Ahead

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

Otherwise, enjoy the column!

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S&P 500 (SPX, SP500)

What a crazy day today with stocks rising to start and then plunging by days end. These days the big gaps higher at the open should really be avoided, don’t get sucked in. The pattern is so obvious that you know it is coming. It became clear today that we were heading for trouble when the S&P 500 index failed at the downtrend that has been in place since October 19. Now the S&P 500 index is trading at 2,641. It fell momentarily below 2,620 but snapped higher.

spx, sp500, s&p 500

Premium Article: Amazon, Facebook, Boeing Facing Steeper Declines


The NASDAQ also gapped higher, and it too failed at its downtrend.



The VIX managed to touch 28, but it still has further to climb. This rise in the VIX is just brutally slow.


Technology Sector (XLK)

Interestingly the XLK technology ETF stopped falling today around $65.50. Why is that important? That is the old all-time high from the peak in 1999. Yeah.  I say this $65- ish level for the XLK is important.

technology, xlk

Biotech (IBB)

The $100 price is significant for the IBB biotech ETF as well.

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Chips (SMH)

$85.25 is an important level for the SMH semiconductor ETF.

smh, semis

Nvidia (NVDA)

Nvidia is one reason why the SMH just continues to fall. This stock is now 38% off its highs and that was only at the beginning of this month.  If this $179.50 level does not hold, then we are probably looking at a drop to $168 as the next level. But that RSI is just creeping lower it and bothers me.

Additionally, this stock is trading at 21 times next years earnings. That is almost double the average of the top 25 holdings in the SOXX ETF.  Additionally, that is assuming those earnings estimates do not come down, because to this point analysts have not lowered any of Nvidia estimates! Which I just can’t understand.

nvidia, nvda

Amazon (AMZN)

Amazon is now 25% off its highs, and it feels like there is more much more pain to come and $1450 is likely in this stock’s future. If that doesn’t hold? Then we are talking about a drop to $1355.

amzn, amazon

But the crazy thing about Amazon, is that despite the declines the stock may still be overvalued. I wrote about this in the spring. Before this year the stock had never traded above 2.5 times one-year forward sales.  Even with the current decline,  the stock is trading at 2.65 one-year forward sales.  At 2.5 times next year’s sales estimates of $281.6 billion, the market cap would fall to $705 billion, that is about 6% less than then the current valuation of $748 billion.   Which is? Surprise! $1,445!  Pretty close to our technical outlook. No I don’t make this stuff up out of thin air, but yes, I agree pretty amazing.

By the way, that is just for its get back to the upper range of the historical trend.  I’m not going even to tell you what it would be at the mid-point.

Fundamental Chart Chart


Fundamental Chart data by YCharts

Apple (AAPL)

The Apple buyer at $215 must have taken a bathroom break today because the stock momentarily fell below $209. But then it quickly ran higher and closed around $212. You have to make sure you have someone watching your orders when you step away from the desk! 🙂

apple, aapl

Boeing (BA)

Boeing got smoked too, $320 may be on the way.

boeing, ba


There is actually one chip stock that is more expensive than Nvidia, AMD. The $16 level looks to generous. $14.60 next.



Roku may be about to take its next leg lower. I’m still looking for $48.



JD.com is breaking down, and now it may be on its way to $20.


Lam Research (LRCX)

Lam Research has a big gap just waiting to be filled, at $128! This stock is now 41% off its highs.

lam reserach, lrcx

Ford (F)

I heard some commentary on Ford today, about how cheap it is. Yeah cheap. Right. Maybe that is because earnings are falling by 25% this year and not expected to grow next year. Perhaps that has something to do with it? The stock trades at 7 times earnings not because it is cheap, but because the profits are melting away, and there are no growth prospects in the future.  The stock is hitting a wall of resistance here. It heading back to $8.75.

f, ford

Altria (MO)

But not all stocks are going down Atria is actually breaking out, and could be on its way to $67.

altria, mo

Good luck tomorrow. Do yourself, and do not even look at the market until 10:30 am.


Photo Credit Via Flickr

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.

S&P 500, SP500, Apple, Amazon, Nvidia, AMD, Nasdaq, Ford, Roku, JD, LAM